By a notice of motion filed on 30 March 2017 the defendant applies (under section 99 of the Civil Procedure Act 2005 NSW and the inherent jurisdiction of the Court) for orders that the solicitor for the plaintiffs personally pay her costs of the principal proceedings.
On 22 March 2017, following determination of a question ordered (pursuant to rule 28.2 of the Uniform Civil Procedure Rules 2005) to be separately determined, I ordered that the principal proceedings be dismissed with costs.
As events transpired, the proceedings constituted a claim by the plaintiffs that the defendant pay them compensation, be it equitable compensation or common law damages, arising out of arrangements made in connection with, or in the wake of, the first plaintiff's retirement from employment as a solicitor with a legal, and conveyancing, firm practising on the north coast of New South Wales.
The separate question, upon which the parties agreed the fate of the whole proceedings turned, was whether the defendant, personally, had signed a deed and an associated contract for the sale of land.
In an unreported judgment, I determined that question in the negative and, accordingly, I dismissed the plaintiffs' proceedings.
The proceedings took that course in circumstances in which the parties agreed that, pending determination of the separate question, it was not necessary for the Court to consider an application by the defendant to have the plaintiffs' statement of claim struck out or the plaintiffs' application for leave to amend the statement of claim. The form of the statement of claim must be taken as not having been settled.
In making an order that the proceedings be dismissed, I ordered that the plaintiffs' pay the defendants' costs of the proceedings, such costs to be assessed on the ordinary basis up to and including 25 November 2013 (a date referable to a Calderbank letter) and thereafter on the indemnity basis.
The primary costs order followed the convention (reflected in rule 42.1 of the Uniform Civil Procedure Rules) that "costs follow the event".
At the time of making an order for costs against the plaintiffs, on the application of the defendant I reserved to the defendant liberty to apply for an order under section 99 of the Civil Procedure Act 2005 against the solicitor for the plaintiffs.
The defendant filed her notice of motion within the time limited for her to do so.
It is common ground that the plaintiffs are, and were at all material times, impecunious. At an early stage of the proceedings they had the benefit of a grant of legal aid but, following representations made by the defendant to the Legal Aid Commission of NSW and sale of a property against which the plaintiffs might have asserted rights associated with the documentation they alleged to have been signed by the defendant, legal aid was withdrawn.
[3]
THE PARTIES' SUBMISSIONS
In large measure, the parties' respective submissions on the defendant's motion have been reduced to writing. The defendant's written submissions dated 18 April 2017 (MFI D8) were followed by the plaintiffs' written submissions dated 26 April 2017 (MFI P9) and, in their turn, by the defendant's written submissions in reply dated 3 May 2017 (MFI D 10). Brief oral submissions, in aid of the written submissions, have also been entertained.
Each party to the motion filed, and read, an affidavit or affidavits directed to the course of the principal proceedings, the nature and prospects of the claims for relief made in those proceedings by the plaintiffs, the existence or otherwise of a belief in the solicitor for the plaintiffs that they had a reasonable "cause of action", and the reasonableness or otherwise of his stated belief that they did have a reasonable cause of action.
In chief, on the motion, the defendant relied upon an affidavit affirmed by her solicitor and another affidavit by a solicitor assisting that solicitor; both affidavits were affirmed on 29 March 2017. The respondent solicitor relied upon an affidavit affirmed by himself on 26 April 2017. In reply, the defendant relied upon an affidavit affirmed by her solicitor on 3 May 2017.
Each of these affidavits was read without objection. There was no cross examination on either side of the record.
Both parties to the motion relied upon substantial documentation exhibited to an affidavit.
In essence, the defendant contends that the plaintiffs never had reasonable cause of action; that the respondent solicitor knew full well that they never had a reasonable cause of action, and that they were impecunious; that the proceedings were maintained for an extraneous purpose (of establishing that the disputed documentation was forged so as to facilitate a separate claim for compensation against the Registrar General's assurance fund or a professional indemnity insurer); that the respondent caused substantial costs to be wasted because he insisted upon advancing the plaintiffs' case generally when, as in due course happened, the proceedings could have been dealt with relatively summarily by a separate hearing as to the authenticity of signatures attributed to the defendant; and that, having actively maintained the proceedings in those circumstances, the respondent should be required to indemnify the defendant in costs.
In essence, the respondent refutes each of the defendant's contentions, contending that the respondent (with reasonable cause) always believed that the plaintiffs had a reasonable cause of action; that he acted with the benefit of advice and other assistance of counsel; that, for various factual reasons, there were reasonable grounds for doubting the veracity of the defendant's denial of execution of the disputed documentation; that, although a judge of the Court had been critical of the plaintiffs' statement of claim during the course of an interlocutory hearing, that criticism has been quoted out of context by the defendant and it did not, in any event, prevent the judge from allowing the plaintiffs an opportunity to amend their pleading; and that the defendant should not be granted an indemnity for her costs at the expense of the respondent in circumstances in which she did not apply, as she could have done, for an order that the plaintiffs provide security for the costs of the proceedings.
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CONSIDERATION
The defendant's attribution of incompetence, impropriety and waisted costs to the respondent solicitor does less than full justice to the underlying factual complexity of proceedings which, ultimately, were able to be disposed of by the determination of a deceptively simple separate question.
The defendant's mother (not qualified as a lawyer) was the practice manager of the firm in which the first plaintiff had been employed as a solicitor. That firm acted for the plaintiffs in the preparation, and purported execution, of the disputed documentation. The defendant ostensibly lent her name to the preparation of such documentation for the purpose of assisting her mother who, in turn, she said, sought, out of charity, to assist the plaintiffs. The circumstances in which the first plaintiff ceased to work in the law firm managed by the defendant's mother are no less murky. The mother, in due course, became a bankrupt and, to that extent, put herself beyond the plaintiffs' reach. In the course of giving evidence, she confirmed that irregular procedures were not uncommon in the firm under her office management.
In all the circumstances, I cannot be satisfied that there are sufficient grounds for imposing on the respondent a personal liability for the defendant's costs.
Dismissal of the plaintiffs' claims for relief, or even characterisation of those claims as lacking reasonable prospects for success, is not of itself sufficient for the making of a personal, wasted costs order against the respondent as their solicitor: Xabregas v Owners Strata Plan No. 79205 [2014] NSWSC 1027 at [50]-[53], [62] and [65]. I am not satisfied that the respondent's conduct of the proceedings should be characterised as involving serious neglect, incompetence, misconduct or other impropriety so as to justify an imposition upon him of a personal liability for the defendant's costs.
Although the respondent's conduct of the proceedings, and the terms of correspondence written to the defendant's solicitor in an endeavour to induce a settlement, invite criticism, I am not satisfied that any personal costs order should be made. In my assessment, significant factors against the making of such an order include the course of the proceedings, with the form of the statement of claim unsettled; the agreement of the parties to abide the outcome of a separate trial, which dispensed with a need to settle pleadings or otherwise to ready the proceedings for a full, final hearing; the complexity of the underlying factual matrix, which precludes any simplistic assessment of the reasonableness of steps taken, or claims made, in the proceedings; the involvement in the proceedings of counsel, upon whom the respondent placed reliance; and, incidentally, the absence of any application for security for costs, by which the defendant might have protected herself against ongoing costs.
I do not exclude from consideration the possibility that the respondent was motivated to support the plaintiffs' claim for relief, in part, by a belief that a finding that the defendant's disputed signatures were forged might (as a secondary objective of the plaintiffs) aid alternative claims for compensation or even establish a basis for prosecution of the defendant's mother for forgery. However, I am satisfied that the respondent held a belief that the disputed signatures were those of the defendant, and that there were reasonable grounds for that belief in that the defendant's mother, and the firm of lawyers and conveyancers under her "practice management", acted for both parties in the transactions in which the disputed documentation played a part.
Accordingly, I order that the defendant's motion be dismissed with costs.
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Decision last updated: 25 February 2020